This may have been a devastating month for the world economy, but it's been a pretty good one for Warren Buffett. He took back the title of "America's Richest Billionaire" from Bill Gates. He used his spare cash – say, a few billion dollars – to buy stocks on the cheap. Even his diet tips appeared on Slate.com (and in a new 960-page biography). And in the Oct. 7 debate, he was named a possible treasury secretary choice by both presidential candidates:

Brokaw: Obviously the powers of the treasury secretary have been greatly expanded, the most powerful officer in the cabinet now. Hank Paulson says he won't stay on. Who do you have in mind to appoint to that very important post?Sen. McCain: ... A supporter of Sen. Obama's is Warren Buffett. He has already weighed in and helped stabilize some of the difficulties in the markets and with companies and corporations, institutions today. ...Brokaw: All right. Sen. McCain. Sen. Obama, who do you have in mind for treasury secretary?Sen. Obama: Well, Warren would be a pretty good choice – Warren Buffett – and I'm pleased to have his support.

In effect, our country has been behaving like an extraordinarily rich family that possesses an immense farm. In order to consume 4% more than we produce – that's the trade deficit – we have, day by day, been both selling pieces of the farm and increasing the mortgage on what we still own.

Buffett was not alone in pointing out the danger of our trade deficit years before "subprime" became a dirty word. Richard Duncan also raised the alarm in his 2003 book, The Dollar Crisis: Causes, Consequences and Cures. Duncan predicted that global supply would soon outrun global demand as the countries pursuing export-oriented growth would produce more and more goods without a corresponding increase in income among worldwide consumers. Duncan was echoing the economist John Maynard Keynes, who argued that depressions occur when savings outrun investment, causing a deficit in the demand for products.

For over a decade, consumers in the trade-deficit countries have been able to make up for the glut of savings in the trade-surplus countries by spending beyond their means. But debtors cannot keep piling on more debt forever. U.S. consumers, like other debtors, have been forced to pull back. That pullback occurred with a vengeance when the financial crisis hit. Ever since, tumbling global stock prices and oil prices have heralded the start of a global recession or depression.

Yet Washington has continued to follow the strategy of borrowing ever-increasing amounts of money from foreign governments to fund ever-increasing giveaways. February's $150 billion stimulus package, this month's $850 billion Wall Street bailout package, and Rep. Pelosi's proposed $300 billion stimulus package are examples of the current Washington strategy in action. (It's only fair to note that Buffett has expressed enthusiasm for the Wall Street bailout package; he sees investments in failing banks as profitable and patriotic. He's been bailing out banks with his private money, à la J.P. Morgan.)

Good investments aside, the problem remains. Rather than fix our trade deficit, we continue to deepen our debt. As Buffett said in his 2005 letter to shareholders, we risk moving from an "ownership society" to a "sharecropper's society."

How would Buffett avoid this? Back in 2003, he proposed a simple solution, the economic cousin of a cap-and-trade carbon emissions plan:

We would achieve this [trade] balance by issuing what I will call Import Certificates (ICs) to all U.S. exporters in an amount equal to the dollar value of their exports. Each exporter would, in turn, sell the ICs to parties – either exporters abroad or importers here – wanting to get goods into the U.S. To import $1 million of goods, for example, an importer would need ICs that were the byproduct of $1 million of exports. The inevitable result: trade balance.

Without this plan, he said, the dollar and our economy would crash as our debt became untenable. Yet he acknowledged that this plan enacts "a tariff called by another name," and therein lies the problem. Some people think that any plan to reduce the trade deficits would repeat the Smoot-Hawley tariff of 1930, which intensified the Great Depression. They fail to understand that when the Smoot-Hawley tariff was enacted, the United States had a small trade surplus, not the huge trade deficit that it has today. The Great Depression was not caused by global imbalances; our current downturn is.

The main objection to Buffett's plan was that it ran contrary to the letter of World Trade Organization (WTO) rules, since it would subsidize U.S. exports. But the WTO system is broken. It lacks a correction market mechanism to balance trade. It lets our trading partners manipulate exchange rates and impose other serious barriers to trade. The Doha Round, which was supposed to renegotiate the WTO agreement, failed this year because India and China would not give up their 25% tariffs on foreign made vehicles, tariffs that are currently permitted by the WTO even when a developing country has a huge trade surplus. Buffett's plan would replace the broken WTO system with a sustainable international system, based upon the fact that balanced trade benefits all of the parties that engage in it.

Under Buffett's plan, American producers' profits would immediately increase. Whenever American producers exported American products abroad, they would earn Balanced Trade Certificates that they could sell to prospective importers. Meanwhile, competing foreign products would face the additional cost of the Balanced Trade Certificates. Export-oriented countries such as China would be forced – finally – to increase the spending power of their own citizens, thus spreading fairness across the world economy.

Buffett's plan would be the perfect plan for both the short-term and long-term right now. The increased money spent on American products would increase American income. The United States, unlike the world as a whole, does not have an excess of savings. There would be plenty of demand for American products if foreigners purchased as much from us as we purchase from them.

Warren Buffett may have had a good month, but he hasn't seemed to relish it. Instead, he has expressed deep concern for what he calls an "economic Pearl Harbor." In a real sense, our economy has been invaded from abroad, but we have our own poor economic policies to blame. Washington should give Buffett more than lip-service. It's time for them to consider his ideas.